Internal reports from Societe Generale admit to a lack of depth in controls as an issue in the major losses incurred from the Jerome Kerviel trading case.

PARIS (Reuters) - An internal investigation by Societe Generale
into a massive trading loss blamed on a single trader has found
controls at the French bank lacked depth, a report published by the
bank showed on Wednesday.

SocGen said last month that rogue deals by Jerome Kerviel, a junior
trader at France's second-biggest listed bank, had caused a 4.9
billion-euro ($7.2 billion) loss.

"At this stage of the investigations, there is no evidence of
embezzlement or internal or external complicity (i.e. the existence of
a third party who knowingly assisted the fraudster to conceal his
positions)," the report said.

"The investigations are continuing, in particular, to cover a wider
area than the activities of the author of the fraud," it added.

Kerviel, 31, has been placed under formal investigation for breach
of trust, computer abuse and falsification and is being held in a Paris
prison.

The internal report reiterated that he started building up
non-authorized trading positions in 2005 and 2006 for "small amounts,"
but that they got bigger from March 2007 onwards.

By the time SocGen discovered what was going on in late January,
Kerviel had amassed a position worth 49 billion euros which SocGen had
to unwind between January 21 and January 23 in an already-falling stock
market.

The bank's woes have renewed speculation that it could be a takeover
target for France's largest listed bank, BNP Paribas.

BONUS CHASING

Press commentators have said that one of the problems might have
been that Kerviel was eager to please his bosses after failing to get a
bonus of the same scale as his peers.

The SocGen report said Kerviel got a 60,000-euro bonus for 2006. He
asked for a 600,000-euro bonus for 2007 but instead received half that.

The report said Kerviel's deception included rogue deals on warrants
with a deferred start date, futures contracts and "forwards" deals
using a counterparty within SocGen itself.

"The General Inspection department believes that, on the whole, the
controls provided by the support and control functions were carried out
in accordance with the procedures, but did not make it possible to
identify the fraud before January 18th 2008," the report said.

It also said SocGen was already taking measures to shore up its risk controls, including biometric security controls.

The report comes a day before SocGen posts 2007 results. SocGen said
last month it expected its 2007 net profit to fall 82 percent to 947
million euros, implying a 3.35 billion-euro loss for the fourth quarter
alone.